Yellen Critiques Trump's Tariff Proposals

By David Lawder

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen will state that isolating the U.S. economy, as proposed by Republican presidential candidate Donald Trump, would be "deeply misguided." This would lead to increased prices for American consumers and reduce U.S. companies' competitiveness.

In excerpts of her remarks to be delivered Thursday afternoon to the Council on Foreign Relations in New York, Yellen emphasized that the U.S. cannot revert to past unilateral strategies for advancing its economic and national security interests.

While Yellen did not mention Trump by name, she addressed his suggestions for substantial tariff increases. Trump has advocated for raising tariffs to 10%-20% on nearly all U.S. imports and at least 60% on imports from China, with threats of up to 200% on specific companies, like John Deere, if production is outsourced to Mexico.

On Wednesday, Trump referred to tariffs as "the most beautiful word in the world," claiming they would boost U.S. manufacturing.

Yellen argued, "Calls for walling America off with high tariffs on friends and competitors alike or treating even our closest allies as transactional partners are deeply misguided." She noted that sweeping tariffs would elevate prices for American families and diminish business competitiveness.

She warned that a unilateral foreign and economic policy—similar to that during Trump's presidency—would hinder today's ability to support U.S. economic and national security interests, such as pressuring Russia regarding its invasion of Ukraine and addressing China’s aggressive industrial policies.

Yellen underscored the importance of maintaining a functional economic relationship with China, stating, "Trade and investment with China can bring significant gains to American firms and workers and must be maintained." However, she stressed that this relationship should be based on a level playing field.

She highlighted that barriers to market access and unfair business practices in China pose challenges for American companies and workers, while also impacting foreign firms operating in China. Such practices are creating excess industrial capacity in key industries, threatening American companies' viability and increasing foreign producers’ dependence on Chinese supply chains.

Yellen also defended President Joe Biden's significant tariff increases on strategic Chinese imports, such as electric vehicles, semiconductors, and solar cells, noting that U.S. allies are adopting similar approaches.

"This growing international consensus is a powerful indication to China that it must shift its practices," she said.